Ministers Life & Cas. Union v. Haase

• Decision Date: 12 April 1966
• Parties: MINISTERS LIFE AND CASUALTY UNION, Plaintiff-Appellant, v. Robert D. HAASE, Commissioner of Insurance, and Bronson C. La Follette, Attorney General of the State of Wisconsin, Defendants-Respondents.
• Court: Wisconsin Supreme Court

Page 287

141 N.W.2d 287

30 Wis.2d 339

MINISTERS LIFE AND CASUALTY UNION, Plaintiff-Appellant, v. Robert D. HAASE, Commissioner of Insurance, and Bronson C La Follette, Attorney General of the State of Wisconsin, Defendants-Respondents.

Supreme Court of Wisconsin.

April 12, 1966.

Rehearing Denied June 7, 1966.

Ross, Stevens, Pick & Spohn, Frank A. Ross, Madison, of counsel, for appellant.

Bronson C. LaFollette, Atty. Gen., Harold E. Persons and E. Weston Wood, Asst. Attys. Gen., Madison, for respondents.

Laikin, Swietlik & Peltin, Milwaukee, George J. Laikin, Milwaukee, of counsel, amici curiae.

HALLOWS, Justice.

The challenged sec. 201.42, Stats., entitled 'Unauthorized Insurance' was created by ch. 397, Laws of 1961, and purports by its terms to apply to the mail-order insurance business and to be a comprehensive regulating and taxing law ¹ of the doing of insurance business in this state by a company which is not licensed to do business herein. In the purpose clause, the legislature declared as public policy its concern with 'the protection of residents of this state against acts of persons and insurers not authorized to do an insurance business in this state by the maintenance of fair and honest insurance markets, by protecting the premium tax revenues of this state, by protecting authorized persons and insurers, which are subject to strict regulation, from unfair competition by unauthorized persons and insurers and by protecting against the evasion of the insurance regulatory laws of this state.' The legislature expressly stated that in enacting the law it exercised its power to protect the residents of the state and to define what constitutes doing an insurance business in this state and also exercised the power and privilege available to it by virtue of P.L. 79--15 (1945), (Chapter 20, 1st Sess., S. 340), 59 Stat. 33, the McCarran Act.

Ministers was organized under the laws of Minnesota 64 years ago and is representative of that class of insurance companies which had their origin in the early Traveling Men's Associations which served a selective class of members principally on a direct-mail basis. It is now a mutual legalreserve life company selling accident and health and life insurance policies to ministers and professional religious workers in the United States and Canada principally by direct mail even in those states in which it is licensed. It is licensed to do business in ten states and in all but two provinces of Canada. It has agents in seven states and one province of Canada.

Wisconsin is a state in which Ministers is not licensed to do business, has no agents therein, and operates on a direct-mail basis. It issues four kinds of insurance policies, group life, individual life, franchised-group accident and health, and individual accident and health. It solicits business through advertisements in national publications and in church and other religious publications. Direct-mail solicitation and group leaders are also used extensively. General mailing is sent to between 60,000 and 140,000 eligible persons some six times a year and a special mailing to between 6,000 and 8,000 selected individuals approximately 12 times a year. In Wisconsin approximately 25,000 mail solicitations are made annually to approximately 3,600 residents. In the case of individual policies, upon receiving an inquiry at its home office in Minneapolis, Ministers mails an application to the prospect who fills it out and mails it back to Ministers. This application is usually accompanied by the first premium. The policy is prepared, signed, and mailed to the applicant from its home office. Under its articles of incorporation, a person becomes a member of Ministers upon delivery and acceptance of the policy and the applicant is given an opportunity to examine the policy upon its receipt; if unsatisfactory, he may reject it and mail it back and his premium will be refunded. All the mailing of notices of premium and other mailing is done at the home office of Ministers and all premiums are payable and received there.

If, in this process of mail-order selling, Ministers needs additional information for underwriting purposes, it obtains it through correspondence with the applicants or from local doctors or by employing national investigatory agencies. For medical information Ministers may use the family physician by mailing a medical-report form to him requesting that he fill it out and return it to the home office. The doctor is paid by Ministers for such services. Physical examinations when required are made by the family physician and occasionally by some other doctor selected by Ministers. All contacts between Ministers and the doctor are by mail and the cost of the medical examination is paid by Ministers. If other local investigation is required, Ministers uses national investigatory agencies either on a basic-charge basis or upon agreed-hourly charge or some other specially-arranged charge. Claims for accidental death, for disability under accident and health policies and for death which occurs during the contestable period of a life policy are generally investigated. While these national agencies have no power to negotiate or settle claims, they do make the necessary investigation and report to Ministers.

Ministers pays claims from its home office on proof-of-claim forms furnished to the claimant or which are generally attached to the policy when issued. Further claim forms, if needed, are sent to the claimant who furnishes such other data and certification and reports as may be necessary.

In selling group-life and group-franchise accident and health insurance a slightly different procedure is followed. A group leader is selected by the group and he negotiates with Ministers by mail for the group policy. In the case of group life, Ministers sends to the group leader its literature and appropriate forms. The group leader undertakes to enroll the individual members of the group on enrollment cards which are sent to Ministers. A master policy for a group is issued and individual members receive a certificate of insurance. A premium notice for the group is sent to the group leader who collects and remits the premiums. However, in the case of a group-franchise accident and health policy each member of the group makes his own application and receives an individual policy direct from Ministers and premium notices after the first premium are mailed directly to the individual member. The activities of the group leader in this latter form of selling are to initiate the original application and the initial premium and to get the group started. No group leader is compensated by fee nor are expenses reimbursed by Ministers, nor does he handle any claims on the group policy.

Ministers has no office, officer, bank account or real estate in Wisconsin. It does own some mortgages secured by Wisconsin real estate. Approximately one-third of the policies held by residents of Wisconsin were issued while such persons were residents of other states.

The business done by Ministers is not insignificant; although compared with large stock companies, it would hardly be considered impressive. As of August 1, 1962, Ministers had in force in the state 626 individual-life policies with approximately $2,000,000 insurance in force, 1842 individual accident and health policies, 2 group-life policies covering about 85 individuals, and 6 franchise-group accident and health policies covering about 350 individuals. In the period from 1955 when Ministers wrote premiums totaling $83,516, it has grown so that in 1961 it wrote premiums of $208,240.

This case does not involve sporadic sales of insurance but a continuous and systematic course of business conduct and the question is whether this conduct or activity is of such a quality and nature and so related to the purpose of the regulation and bears such relationship to Wisconsin in respect to the state's interest in such activity and the subject of the insurance that this state may regulate and tax it. Phrased in traditional conceptual language of 'presence in the state,' is Ministers 'doing business' in the state of Wisconsin for the purpose of regulating that business?

Ministers contends the state of Wisconsin has no jurisdiction to tax or regulate its mail-order insurance business by sec. 201.42, Stats., because that section violates (1) the commerce and the supremacy clauses, (2) the due-process clause, (3) the contract clause, and (4) the postal clause of the United States constitution.

We do not agree and expressly hold the state of Wisconsin has jurisdiction to enact an insurance regulatory and taxing statute such as sec. 201.42. The insurance business from its very inception has been so permeated with public interest and with the need for regulation that it has been considered the proper object of regulation by the state. As early as 1869 the supreme court held in Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357, that the fire-insurance business although properly subject to local regulation was not interstate commerce and thus subject to federal regulation. In reliance upon that case and many subsequent cases which enlarged the doctrine to include other phases of insurance, ² the states enacted a variegated mass or network of insurance regulations. However, in 1944 in United States v. South-Eastern Underwriters Association (SEUA), 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440, the supreme Court held the modern business of insurance was interstate commerce and thus subject to regulation by congress under the commerce clause. That decision seriously affected state regulation and upon the urging of the insurance industry, congress responded the following year with the passage of the McCarran Act, 59 Stats. 33, ch. 20, 15 U.S.C. §§ 1011--1015. This act left to the states the regulation and taxation of insurance, stating such continual regulation was in the public interest and that...